Are You Working with the RIGHT Financial Advisor | The Retirement Income Show

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Moderator: Welcome back to The Retirement Income Show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group. Again, you can always find out more on the website, oakharvestfinancialgroup.com. A tremendous website, lots of information, oakharvestfinancialgroup.com. You can always go to YouTube and watch Troy on his channel, there are over 100 videos that Troy and the team have put together for retirement, for financial questions. Just search for Troy Sharpe and Oak Harvest. If you have any questions about where you are and your road to retirement, you can always call the team, there’s no cost. 800-822-6434, 800-822-6434.

Troy, you’re talking about some of the trend now on some of your YouTube channels, you’re putting in a scenario as, “Hey, I’ve got $1.3 million, I’m 62 years old. Can I retire? Should I move some money to Roth?” You’re doing some case studies on there. You mentioned a couple of things in the last person you were talking about and you mentioned fiduciary. Not everybody knows what a fiduciary is. Can you explain that? Then you throughout tax harvesting and I’m lost on tax harvesting.

Troy Sharpe: Yes. A fiduciary is just someone who has the duty of loyalty, the duty of care, and always puts their clients’ best interests ahead of theirs. Investment advisors are licensed and have a fiduciary responsibility. Brokers, on the other hand, do not have that fiduciary responsibility. There are some changes out there with what’s known as regulation BI and they’re trying to move more in that direction to regulate brokers. I guess the point is not all advisors, they’re people who call themselves financial advisors, are actually looking out for peoples’ best interests. That’s just a fact.

I can’t tell you how many times over the years I’ve had a family come in and say, “Troy, my advisor made more money than me over the past 10 years. I don’t understand how that possibly happens but it does happen.” The only way it can happen is if someone is not looking out for your best interest and they’re trying to line their pockets with more money than you, essentially. Just make sure you’re working with someone first and foremost, whether you’re fiduciary by license or not, use your gut instinct. Does this person care about me? Does this person care about my family? Is this person honest?

Even though you’re not licensed that way, you can still act in a fiduciary capacity. It’s just there are bad people in every walk of life, and they find their way sometimes into the financial industry, and real families and real people get hurt. Fiduciaries, of course, they have to put your best interest first. Tax-loss harvesting, pretty basic concept when it comes to managing money.

It’s simply when we have this investment, investment A and investment B, and we’re rebalancing the portfolio or providing income distributions that we’re trying to monitor what has gains and what has losses and what do we sell in order to try to offset those gains in order to provide the income or rebalance the portfolio correctly in a manner that minimizes the tax liability that you have. This is a great example of how not every firm does this. I don’t ever name names and what not just because I just don’t do that, but had a client recently come in, they’re non-qualified investment accounts so they’re non-IRA.

Most big firms, they have very, very strict regulations as far as when the portfolio gets rebalanced. What you tell them, if you tell them you’re a moderate risk, most likely you’re going into a 60/40 stock-bond portfolio. I’m not going to get into how I believe 40% of your money in bonds, it best will break even over the next few years and probably will lose 2% to 3% a year in inflation. The point of this story is they had a 60/40 allocation even though they told them they don’t like bonds and they didn’t want to be in bonds. They said, “This is all we can do. This is what our model does. We put you into 60/40.”

Of course, the 60% stock over the past couple of years has done tremendously well. The bonds of course have not. Come the end of the year, they rebalanced the 60% stock, which had grown to be about 75% of the portfolio. They bring it back in line with the appropriate risk tolerance, but there’s no tax-loss harvesting going on. They just across the board sell all of the stocks, reposition it into bonds, despite what the outlook for bonds is and despite never contacting the client and having a conversation with them, and of course, they create almost a $20,000-taxable hit to the client simply through that automatic rebalancing procedure.

How we would like to have seen that done is a phone call to the client. This is what we would do. This is where you are from a risk standpoint. This is where the portfolio’s grown. If we want to bring it back in line, we’re going to sell these stocks, sell these positions, et cetera, et cetera, but this is the tax consequence of it. Then just have simply a conversation is this the right thing to do or not, based on our forecast, based on the economic outlook, the data out there, and their overall tax and income plan. This is why I’m not a big fan of one family having two different advisors.

Let’s say, we had a tax plan in place for that person. Again, just hypothetically speaking here. If we have a tax plan in place and the other advisor automatically rebalances that non-qualified account and causes a $20,000-taxable hit, which means it was over $100,000 in gains, probably close to it, that $100,000 in capital gains goes on the tax return increases the adjusted gross income can impact our tax plan over here. Now all of a sudden the conversion that we’ve planned out, and let’s say we were targeting the 22% bracket or 24% or 12%, or anywhere in between. Now all of a sudden the actions of that advisor, that firm have completely messed up the tax plan that we put in place for that client.

It brings up a good point, but these are a lot of the things that we’re talking about on the YouTube videos, and in these case studies, going through and showing people if we do this with the Roth conversion, what is it that you need to be aware of? What is the possible things that could happen which could alter the potential outcome that we’re going through in this analysis? We can’t help everyone. I wish we could help everyone. The truth of the matter is we have a limited capacity of families that we can help. That’s why we require relationships. That’s why there is a limited capacity.

We will never, ever, ever– I promise you this, never ever grow beyond our ability to service our existing clients. This is what’s most important to me. It’s not about the growth if the growth does not come with a very, very, very high level of customer service. Now, of course, we’re not going to be perfect and no human being is, but that is the mission here. That is what we strive for day-to-day. From a hiring standpoint and providing the human capital and resources to accomplish that and to execute on that mission, that falls on my shoulders and that is something that I will never, ever, ever do is grow this firm without the same capital and human resources dedicated to providing service.

That’s why it’s we need a relationship with you and your family in order to be that CFO as time progresses, to be that chief financial officer. Ultimately, you’re making the decisions but we put our team, our time, our resources, our analytical capabilities, and the experiences and the wisdom that we’ve gained after helping thousands of people in retirement and seeing how things shake out. 1-800-822-6434, 1-800-822-6434. This is The Retirement Income Show. Go to YouTube, type in that search bar, Oak Harvest Financial Group. Look for these case studies that I’m talking about here.

I’m 60 with $1 million, can I retire? Type that in. I’m 63 with $1.4 million, can I retire? Type that in and look to understand how there’s a reason we have this Retirement Process process where risk management and investments comes first, income planning, and then tax planning. We have to have those pieces in place in that order ultimately to have a proper plan. When you look at these videos, you’re going to see the tax analysis that I’m talking about here for a lot of these case studies.

You’re going to see probabilities of what happens if they spend this family with $1.4 million? What happens if they take social security at full retirement age 67, and they do a Roth conversion of $100,000 a year for four or five years? What is the impact? From a tax perspective, how much tax does that save them potentially over time, but as well as what is the probability of success?

We’ll run 1,000 Monte Carlo simulation and actually it comes up with a probability if you do this, you’re at 79%, you’re at 92%, whatever that number is. You have to go to YouTube, you have to find those videos, and you have to watch them. 1-800-822-6434. Of course, you can always just simply give us a call and sit down and have this customized, personalized analysis and discussion done for you and your family with one of our advisors here.

Moderator: Hey, Troy, we started this show talking about you’ve got a lot of clients that are concerned about a recession. Should we be doing something different? Should we be thinking about moving to cash? Is the rebalancing– It’s a general term when it comes to something that we really should look at all the time, especially when you have the long bull run that we’d had is that you can get out of whack. Obviously, your story was it’s really about where and how you rebalance. Rebalancing something, I imagine you do every year for your clients.

Troy: Yes. We have to rebalance. Of course, we want to stay in the correct parameters of risk. Again, it comes down to if you have that Retirement Process plan in place and you know where your income is coming from, what we’re doing from a tax standpoint, and how much we’re allocating to stocks, there’s a reason for each of those decisions. Oftentimes when people do it themselves, they cost themselves a significant amount of money. These are simply hidden fees. You don’t want to have an investment portfolio that of course is too aggressive, but you don’t want to have an investment portfolio without having an income strategy, without knowing where is my income coming from for the next couple of years.

Corrections in the stock market, they truly are healthy. I know this is going to sound counterintuitive because once you do retire, when you see the accounts go down, or the market goes down 10%, 20%, 30%, there’s a psychological impact there. Losses hurt about four or five times more than gains make you happy. When you have no more income, and you have no more job, and you’re depending on that money, it is extremely painful. I believe it’s even more so than what a lot of those studies say.

If you have an income plan, you have a tax plan, and you’ve not allocated too much to the stock market, you’re not depending on the stock market for your income at least over the next two, three, four, five years. It’s all about having that plan and then being connected to that plan. Then when we stress test the plan, and we say this is what we have allocated to equities. If the market goes down 20% or 30%, this is what you can expect to lose. This is what this bucket would go down in. If you’re not supposed to touch that bucket for 5 years or 10 years, does it really matter?

If you answer yes to that question, it does matter, I don’t want to see my money lose at all, you simply shouldn’t be in the stock market, or you simply need to extensively reduce your exposure to stocks. These are just conversations we have to have, and keeping in mind that sometimes that is very advantageous to be in the market, and it is okay to take a little bit more risk because there simply aren’t many risks out there. You don’t want to overreach here, but understanding the forecast, the outlook, what the indicators are saying can help tilt the portfolio, tilt your risk profile possibly a little bit. If you’re emotionally capable of dealing with those ups and downs to hopefully make you more money over the long term.

Same thing can be said when things aren’t looking so good. We need to reduce risk, maybe get defensive. We’ll talk more about this recession in a minute, but the short answer is, no, we do not think a recession is imminent by any means. It doesn’t mean we like the direction that certain things are going, that’s for sure, but the economy is expected to expand about 1.3% in just the third quarter alone. Definitionally, a recession is a contraction of GDP in two consecutive quarters. We’re coming out of the Coronavirus pandemic here, the economy is still expanding, it is not anywhere near contracting.

Although there’s obviously some concerns out there, but don’t let the media overblow it, don’t get jittery yet. There’s just no need to in our opinion, but again, we are monitoring these things. 1-800-822-6434. The most important thing is let’s have a plan, income taxes, risk management, healthcare, estate planning. Huge, huge on the estate planning side with what it’s about to transpire as far as the legislative changes there.

Give us a call, let’s sit down, let’s have a conversation with you and your family and start to connect your security, your emotional well being and retirement to your money, and make sure that you understand where you’re at, where you’re going, what decisions are being made and why. That’s how I believe you sleep better at night. Oak Harvest Financial Group, and check out the YouTube channel.

Moderator: Oakharvestfinancialgroup.com. Search for Oak Harvest and Troy Sharpe on YouTube, and you can always give them a call, 800-822-6434. We’re back with our final segment of today’s Retirement Income Show with Troy Sharpe right after this.

Sean Hannity: Hey. Your friend Sean Hannity here. During these uncertain times with the market in constant flux, you need a financial professional with a steady hand who can help protect your assets and your important retirement. That’s why it is important that if you’re concerned with your retirement income, in particular, you work with someone that is conservative.

I don’t mean conservative in politics, but more importantly, someone who is conservative when it comes to investing in here in Houston, Troy Sharpe and his team at Oak Harvest Financial Group. Give him a call now, 800-822-6434. Look, we all want to preserve our wealth, but a great first step is to call Troy’s team for a retirement income analysis. That’s 800-822-6434. Call Troy Sharpe and the team at Oak Harvest Financial Group. 800-822-6434

Speaker 4: Oak Harvest Investment Services is a registered investment advisory firm. Troy Sharpe is an investment advisor representative and insurance professional. Investing involves risks including the possible loss of principal. Sean Hannity has been remunerated and is not a client.

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